What is Spread in Forex?
Spread in forex is the difference between the ask price and bid price in a currency pair.
Forex trading platforms measure the spread in PIPs. It is the smallest measurement unit of change in the forex market.
The beneficiaries of wider spreads are brokers and narrower the traders.
Traders pay a higher fee when the spread is wider, and a lower price when the spread is tighter.
Read More: Introduction to Forex Market
How to Calculate Spread in Forex?
The calculation of spread in forex is easy. Just by deducting the ask price from the bid price you get the current spread.
How Many Types of Spread Are There?
Generally, there are two types of spread, floating and fixed spreads.
Floating spread means that it is changing constantly. while the fixed spread means, that it is always set to certain PIPs.
Does Spread Differ Among Brokers?
Spread is different among brokers. Some brokers provide tighter while some other wider spreads. Generally, ECN brokers have tighter spreads, Market Makers have the widest, and STP brokers are in the middle.
Does Spread in Forex Differ Among Account Types?
Yes. Some brokers provide you services with different types of accounts, such as standard, Islamic, zero spread, and ECN accounts.
Islamic account has the widest spreads, followed by the standard, ECN and Zero spread accounts.
You can find the range of spreads on their websites.
Does Spread Differ During a Day?
Time of the day also impacts the size of the spread. When many markets in the world are open, the spreads are narrower. On the other hand, when there are a few markets open, the spread is wider.
Additionally, it’s wider during economic events or when there are low volumes and narrower when there is no event or when the trading volumes are high.
During the time that European Market and American markets are open, the spread is narrowest. The spread gets wider as the European markets are closed and gets wider when American Markets are also closed.
When there are many markets open, more traders are active, which competes in the market and pushes down the spread size. That is why the spread during rush hours is tighter.
How to Check Spreads for Symbols?
Most trading software provides you with a tab called Market Watch. You can check any moment spreads for all available symbols for trading.